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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Pre-tax loss before income taxes was $16,914 and $2,373 for the years ended December 31, 2023 and 2022, respectively, which consists entirely of losses in the U.S. and resulted in $0 and $209 provision for income tax expense during the years then ended, respectively.
Components for the provision for income taxes consist of the following:
Year Ended
December 31,
20232022
Current
Federal$— $115 
State and local— 94 
Total current tax expense$— $209 
Deferred
Federal$— $— 
State and local— — 
Total deferred tax expense$— $— 
Provision for income tax expense$— $209 
The differences between income taxes computed using the U.S. federal income tax rate and the provision for income taxes are as follows:
Year Ended
December 31,
20232022
Federal income tax expense at statutory rate$(3,552)21.0 %$(498)21.0 %
State income tax expense at statutory rate(1,167)6.9 (87)3.7 
Permanent differences285 (1.7)108 (4.6)
Research and development credit— — (31)1.3 
Federal and state rate differential72 (0.5)(16)0.7 
Change in valuation allowance(39,891)236.9 733 (30.9)
Reduction of worthless attributes44,253 (262.6)— — 
$— — %$209 (8.8)%
The effective tax rate for the year ended December 31, 2023 is attributable to the fact that the Company is subject to the IRC Sec. 174 regulations requiring companies to capitalize certain research and experimental expenditures and IRC Sec. 382 loss limitation rules on the Company's ability to utilize net operating losses to offset the capitalization requirement. The effective income tax rate for the year ended December 31, 2023 was 0% because the Company generated tax losses and provided a full valuation allowance against its deferred tax assets to an amount that is more likely than not to be realized.
The significant components of the Company’s net deferred tax assets are as follows:
December 31,
20232022
Deferred Tax Assets
   Net operating losses$3,145 $36,331 
Tax credits— 472 
Capitalized R&D expenses741 5,795 
   Intangibles— 117 
   Accrued expenses41 40 
   Operating lease liability1,900 2,097 
   Equity-based compensation— 1,874 
Investment Loss Adjustment570 — 
   Other— 56 
Less: Valuation allowance(4,250)(44,145)
Total deferred tax assets2,147 2,637 
Deferred Tax Liabilities
   Prepaid expenses(217)(262)
   Fixed assets and other(15)(292)
Deferred Rent(57)— 
   Right-of-use asset(1,858)(2,083)
Total deferred tax liabilities(2,147)(2,637)
Deferred taxes, net$— $— 
The Company’s effective income tax rate for the year ended December 31, 2023 is $0. The Company has recorded a full valuation allowance against its deferred tax assets. This determination is based on significant negative evidence, including:
•Cumulative losses: The Company has been in a significant cumulative loss position since its inception in 2011.
•Projected realization of net operating loss carry forward amounts: Projections of future pre-tax book loss and taxable losses based on the Company's recent actual performance and current industry data indicate it is more likely than not that the benefits will not be recognized.
At December 31, 2023, the Company had a federal net operating loss carryforward of $11,034, which are indefinitely lived. At December 31, 2023, the Company had $11,033 of state net operating loss carryforwards, which will begin to expire in 2043.
We experienced an “ownership change” within the meaning of Section 382(g) (“Section 382”) of the Internal Revenue Code of 1986, as amended, during the fourth quarter of 2022. In general, the annual use limitation equals the aggregate value of our stock at the time of the ownership change multiplied by a specified tax-exempt interest rate.
We determined that at the date of the 2022 ownership change, we had a net unrealized built-in loss (“NUBIL”). The NUBIL was determined based on the difference between the fair market value of our assets and their tax basis as the ownership change date. Because of the NUBIL, certain deductions recognized during the five-year period beginning on the date of the IRC Section 382 ownership change (the “recognition period”) are subject to the same limitation as the net operating loss carryforwards or certain other deductions. As of 2023, the business model has
substantially changed which fully limits our ability to recognize these deductions. As the Company disposed of the majority of their operating business, they are subject to a zero limitation under Section 382 of the Internal Revenue Code which makes the net operating losses unusable. Accordingly, the Company has not recorded federal and state net operating losses from prior to ownership change.
At December 31, 2023 and 2022, the Company had no unrecognized tax benefits. The Company's estimate of the potential outcome of any uncertain tax positions is subject to management's assessment of relevant risks, facts and circumstances existing at that time. The Company evaluates uncertain tax positions to determine if it is more-likely-than-not that they would be sustained upon examination. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes.
The Company is subject to taxation in the U.S. and various state jurisdictions. The Company remains subject to examination by U.S. federal and state tax authorities for the years 2019 through 2023. There are no pending examinations in any jurisdiction.